US embassy cable - 05BAGHDAD2854

UNCLAS SECTION 01 OF 10 BAGHDAD 002854 
 
SIPDIS 
 
KHARTOUM for D Party - Ross Wilson 
 
E.O. 12958: N/A 
TAGS: ECON, PREL, IZ, ECON Development, Reconstruction 
SUBJECT: IRAQ'S ECONOMIC VISION 
 
1.  SUMMARY:  At the June 22, 2005 International Conference 
on Iraq held in Brussels, hosted by the US and EU and 
attended by over 80 countries and organizations, Iraqi 
Finance Minister Ali Allawi and Minister of Planning and 
Development Cooperation Barham Salih jointly presented the 
ITG's vision for the economic reconstruction and 
development of Iraq, highlighting current priorities and 
challenges.  Paragraph two contains the "vision statement" 
distributed at the Conference.  Para three contains the 
text of Planning Minster Saleh's speech, and para four 
contains the text of Finance Minister Allawi's speech. The 
ITG will further elaborate the vision laid out in Brussels 
at the July 10-11 US-Iraq Joint Committee on Economic 
Reconstruction and Development(JCRED) in Amman, Jordan, 
chaired by Deputy Secretary Zoellick and Finance Minister 
Allawi, and at the July 18-19 IRRFI Donors Conference in 
Amman, where Minister Salih will present the ITG's National 
Development Strategy.  The Brussels documents outline a 
clear message of the ITG's commitment to reform and market- 
oriented development. Embassy Baghdad believes they will be 
useful to posts as they approach host governments on the 
July 18-19 IRRFI Conference.  END SUMMARY 
 
2. Vision Statement: 
 
BEGIN TEXT 
 
Iraq's Strategic Vision For National Development 
 
Presented to the International 
Conference on Iraq 
Brussels, Belgium 
21-22 June 2005 
 
Republic of Iraq [flag of Iraq] 
Ministry of Planning and Development Cooperation 
 
Vision Statement 
"Accelerating the Pace and Reconstruction and Development" 
 
The Government of Iraq has a clear vision for the country 
based on its National Development Strategy.  The Vision is: 
 
"Transform Iraq into a peaceful, unified federal democracy 
and a prosperous, market-oriented regional economic 
powerhouse that is fully integrated into the global 
economy." 
 
This ambitious Vision can only be achieved by a market- 
oriented economy.  One that is open to the world, driven by 
the ingenuity and creativity of private enterprise, founded 
on the rule of law, and led by a democratic, transparent 
and accountable government. 
 
The reforms required to achieve this Vision are complex and 
challenging but need to be carefully paced and sequenced, 
accompanied by social safety net measures to protect the 
poor and most vulnerable in society. 
 
The recently published Iraqi Living Conditions Survey 
documents the severe deterioration in the quality of life 
of the Iraqi family relative to a baseline of 1980, when 
the previous regime began its tragic effort to gain 
regional hegemony.  This is reflected in the unstable and 
unreliable supply of electricity with more than 3.2 million 
households experiencing interruptions.  The high cost and 
low quality of water with more than 76 percent of all rural 
households having problems accessing drinking water.  The 
alarming reduction in urban access to safe drinking water 
from 90% to 60% of the population.  The decline in the 
quality of sanitation with more than 1.5 million people 
suffering from unimproved sewer systems and the high cost 
and low quality of housing with more than 45% of all 
households reporting dissatisfaction. 
 
The Survey also documents the precipitous collapse of the 
health system.  This is reflected in the decline in primary 
health care centers from 1,800 in 1991 to 929 in 2001 of 
which more than 30 percent need rehabilitation.  Maternal 
mortality remains above regional averages with more than 
half of deliveries taking place at home in rural areas. 
The high incidence of respiratory infections in urban areas 
and the fact that over 200,000 Iraqis have chronic illness 
due to the war serves to underscore the poor overall 
conditions of the population. 
 
The Survey shows there is widespread unemployment in Iraq, 
in particular among young men whose unemployment rate 
reaches an astonishing 37 percent.  The employment 
situation is complicated by the fact that Iraq has an 
estimated 192 state-owned enterprises that together employ 
500,000 people.  Yet many of these state-owned enterprises 
are not commercially viable, many having been looted and 
destroyed during the war.  Indeed, most of these 
enterprises are idle and will not be able to create jobs in 
the foreseeable future.  Supporting these loss-making 
state-owned enterprises imposes a huge burden on the 
economy and crowd out opportunities for new private-sector 
initiatives. 
 
It is evident from the above grim statistics that the 
legacy of the previous regime, and regrettably the failure 
of the international community to ensure that the Oil-for- 
Food program was immune from manipulation by the previous 
regime, has caused immense damage to Iraq. 
 
Given these serious challenges, Iraq is determined to its 
unequivocal and enduring commitment to the path of reform 
and to deliver effective results-driven leadership.  This 
will require the transparent and efficient use of public 
expenditures, from both domestic and foreign sources, and 
the eradication of corruption. 
 
A reflection of this commitment is the fact that the 
Ministry of Finance, the Central Bank of Iraq and the 
Ministry of Planning and Development Cooperation (MOPDC) 
have jointly resolved to create synergies by working 
together more effectively to implement the needed reforms. 
 
The Ministry of Finance will continue to play a leading 
role in economic policy making with a particular emphasis 
on maintaining budget discipline and implementing sound 
fiscal policy.  The Central Bank of Iraq will continue to 
lead in implementing a sound monetary policy and prudent 
regulation of the financial and banking systems. 
 
MOPDC is the lead Government agency for private sector 
development and investment planning and investment 
promotion.  It will continue as the officially designated 
focal point for the international donor community, and is 
charged with the overall supervision of the preparation, 
negotiation, implementation, and evaluation of all donor- 
funded projects in Iraq. 
 
However, it is clear that Iraq cannot achieve this 
ambitious Vision in isolation.  Iraq will require enhanced 
partnerships with the international community.  Enhanced 
partnerships, based on mutual accountability, will 
accelerate the pace of reconstruction and development and 
improve the quality of life of the ordinary Iraqis. 
 
The partnership between Iraq and the international 
community has realized remarkable achievements since the 
dawn of the new Iraq.  In the area of infrastructure 
rehabilitation, telecommunication networks have been 
expanded, electricity and water networks improved, over 
1,000 schools have been rehabilitated and numerous roads, 
bridges and ports are under construction. 
 
In the area of fiscal and monetary policy much has been 
done to restore the capacity and credibility of Iraq's 
financial institutions.  Our efforts in monetary reform 
have stabilized the new Iraqi Dinar and restrained 
hyperinflation.  This includes providing Central Bank 
independence and strengthening the tools of monetary 
policy.  Achieving the Paris Club debt forgiveness 
agreement has dramatically improved Iraq's fiscal stance as 
has introducing fiscal prudence into budgetary processes 
with a view towards equity and accountability.  Steps 
towards accountability include improving the fiscal 
oversight powers and auditing capacity of the Board of 
Supreme Audit and ministerial inspector general offices, as 
well as establishing precedents for use of independent 
external auditors on government accounts. 
 
In the area of market-oriented reforms, Iraq has revised 
several of its key commercial laws, maintained low custom 
fees to encourage imports and exports, developed strategies 
for reducing government price controls and laid the 
groundwork for privatization.  Iraq has also established a 
major agricultural revitalization campaign and passed an 
internationally compliant insurance law in March 2005 that 
became effective in June, 2005. 
 
To deepen integration with the world economy Iraq signed an 
Emergency Post Conflict Assistance (EPCA) agreement with 
the IMF, initiated WTO accession talks, and concluded the 
United Nations Oil-for-Food program. 
 
However, despite the tremendous progress to date, much 
remains to be done to overcome formidable challenges facing 
Iraq.  Iraq has demonstrated its commitment to transparent, 
accountable and efficient use of public resources.  If, 
together, we are to meet the pace we need to achieve our 
goals, we will need international donors to sharply scale- 
up resource transfers, including direct budget support, and 
ensure that pledges are disbursed in a predictable manner. 
It will also be necessary to streamline and simplify the 
procedures for disbursing donor assistance, and ensure that 
nation-wide projects are executed nationally and are fully 
aligned with the priorities established in Iraq's National 
Development Strategy (NDS). 
 
Priorities 
Our Strategic Vision rests on the following key drivers of 
economic performance: 
- Removing constraints to private sector development, which 
is the future engine of job creation and economic 
diversification, within a strong legal and regulatory 
framework supported by accountable government institutions. 
- Improving the quality of life and ensuring gender 
equality and human resource development. 
- Strengthening good governance, democratization and human 
rights.  Transparency and accountability are an integral 
part of successful government operations in a democratic 
country governed by the rule of law. 
- Enhancing donor coordination for development 
effectiveness. 
 
Objectives 
 
Within each priority we have identified the following key 
objectives: 
 
Creating an Enabling Environment for Sustainable Economic 
Growth 
 
1.  Maintain low inflation within the context of sound 
monetary policy, and expanded monetary policy tools. 
2.  Maintain fiscally sound budgets and transparent 
controls for budget formulation.  Meeting fiscal targets 
will be assisted by subsidy reforms.  The Government is 
about to announce the first phase of a two-pronged plan to 
increase the official price of fuel and create a private 
sector role to import refined petroleum products for retail 
sale.  The Government also expects to remove ancillary 
products included in the Public Distribution System (PDS) 
basket, as well as implement pilot projects for 
monetization of the PDS' benefits. 
3.  Develop and implement mechanisms to ensure transparent 
and full accountability of oil revenues within the budget 
process, including recommendations from the IAMB and their 
auditor KPMG. 
4.  Conclude debt relief agreements with both Paris Club 
and non-Paris Club creditors. 
5.  Implement all macroeconomic and structural reforms 
under the IMF's Emergency Post Conflict Assistance (EPCA) 
agreement, including implementing a timely and accurate 
monetary survey and establishing a single treasury account. 
6.  Improve the quality, timeliness, and range of financial 
and economic data produced by government offices for 
economic planning. 
7.  Secure the return of frozen assets from a number of 
countries, including Syria, Lebanon, Jordan, Kuwait, 
Switzerland and Thailand. 
8.  Establish independent national oil and gas companies 
(both upstream and downstream), and promote sector 
partnerships between Iraqi and foreign oil and gas 
companies. 
9.  Implement fiscal decentralization and devolution of 
planning responsibility to local and regional governments. 
10.  Diversify sources of growth towards agriculture and 
services. 
11.  Increase domestic resource mobilization by creating 
conditions conducive to private savings by strengthening 
the deposit-taking commercial banking sector with a 
national payments system. 
 
Removing Constraints to Private Sector Development 
1.  Streamline and simplify the procedures for doing 
business in Iraq.  In that context a new Foreign Investment 
Law is under consideration, including the establishment of 
an Investment Promotion Agency. 
2.  Implement commercial and regulatory reform to develop a 
transparent legal and institutional framework to encourage 
entrepreneurship. 
3.  Lay the groundwork for eventual privatization of state- 
owned-enterprises, according to orderly, fair, consistent 
and transparent procedures. 
4.  Promote private sector-led implementation of local 
community projects that are executed nationally. 
5.  Restructure State-owned banks to encourage 
consolidation and privatization. 
6.  Expand the availability of commercial capital through 
concessional financing for micro-finance and small and 
medium enterprises. 
7.  Complete accession to the World Trade Organization 
(WTO) and revitalize regional trading links. 
8.  Close the digital divide by increasing access to 
telecommunications. 
9.  Rehabilitate and expand regional airports. 
10.  Rehabilitate and expand the national railway network. 
 
Improving The Qualify of Life 
1.  Increase electricity generation and distribution to 
meet current and projected needs. 
2.  Provide clean accessible water to all Iraqis. 
3.  Equip and expand hospitals and primary health care 
centers. 
4.  Increase affordable housing units through housing 
finance facilities and a securities-based mortgage system 
that allows lenders to pool their risks. 
5.  Explore the possibility of providing an oil-dividend to 
all Iraqis to enable them to share in the rich natural 
wealth of the country.  This is consistent with the 
Transitional Administrative Law (TAL) that calls for 
distributing oil revenues in an equitable manner.  An Iraqi 
National Identity Card System will be instrumental in 
ensuring the success of this program.  But more importantly 
will be a consolidated governmental effort to continue 
improving the formulation, execution, and oversight of 
fiscal policy and oil revenues in Iraq with added 
transparency, public participation, and stronger 
institutional checks and balances. 
6.  Increase adult literacy and vocational training. 
7.  Reduce school dropout rates. 
8.  Reduce maternal and infant mortality. 
9.  Enact a social safety net program for the poor and 
vulnerable, which may extend from reform and monetization 
of the PDS basket. 
10.  Restructure and accelerate demining activities, with 
MOPDC responsible for budgeting and the Civil Defense Corp 
and/or Ministry of Defense responsible for demining 
operations. 
 
Strengthening Good Governance, Democratization and Human 
Rights 
1.  Accelerate judicial reform to ensure an impendent and 
effective Judiciary. 
2.  Implement the new public procurement regulations for 
Ministries and public agencies for proper and effective use 
of State funds. 
3.  Establish a Leadership Code of Conduct and Ethics 
requiring inter alia declaration of wealth by public 
officials to ensure good governance. 
4.  Strengthen the Public Integrity Commission and 
decentralize its activities to the regions to eradicate 
corruption. 
5.  Continue strengthening the Board of Supreme Audit and 
decentralize its activities to the regions to ensure 
transparency in public financial management. 
6.  Train the police and prisons force in human rights. 
7.  Empower civil society, including support for a free 
press. 
8.  Establish e-government to modernize governmental 
business processes. 
9.  Promote gender equality as a general public policy. 
 
Enhancing Donor Coordination for Development Effectiveness 
1.  MOPDC will strengthen its capacity as the Government's 
lead agency for private sector development and investment 
planning and investment promotion. 
2.  Through its Grant Aid Coordination Unit, MOPDC will 
strengthen its role as the point of contact for all donor 
coordination, to ensure the proper and effective allocation 
of all donor resources to the areas of highest priority, 
under the overall policy guidance of the Iraqi Strategic 
Review Board (ISRB). 
3.  MOPDC will strengthen its capacity to coordinate 
directly with the Ministry of Finance to integrate donor 
funding into the national budget, to ensure conformity with 
the overall budgetary framework. 
4.  MOPDC will strengthen its capacity to guide, assist and 
supervise sector Ministries in their national execution of 
donor-funded projects within their respective sectors, and 
coordinate between these Ministries and multilateral and 
bilateral financial and developmental organizations. 
5.  As Chair of the Council for International Coordination 
(CIC), the Minister of Planning and Development Cooperation 
will recommend a new donor coordination mechanism that will 
be more inclusive, Iraqi-led, based in Baghdad, linked to 
donors in Amman, Jordan via video-conference, and supported 
by the United Nations and other donors and institutions. 
6.  Donors will be urged to simplify and harmonize their 
policies, procedures and practices to minimize bureaucracy 
and delays in project implementation. 
7.  Operationalize a comprehensive Donor Assistance 
Database. 
 
Conclusion 
Iraq's Vision is about achieving demonstrable socioeconomic 
development results for all Iraqi people that are 
sustainable over the long-term and touch the lives of every 
single Iraqi.  This is an integrated Vision with clear 
inter-relationships between many aspects.  Often key 
activities under one objective will also contribute to 
delivering others. 
 
Anchoring our Vision for the future is the realization that 
improving the quality of democratic institutions and 
processes, managing the changing role of the State and 
promoting a vibrant civil society must underpin our 
overarching goal to rebuild Iraq and improve the quality of 
life of all Iraqis. 
 
The forthcoming National Development Strategy (NDS), to be 
presented at the IRFFI Donor's Committee Meeting in Amman, 
Jordan on July 18-19 2005, will provide additional details 
of Iraq's Strategic Vision and specific objectives for 
economic reconstruction and development.  It will link 
priorities for reconstruction with broad reform initiatives 
in order to articulate national economic goals for the 
benefit of the Iraqi people and assist the international 
community in delivering support.  The NDS will encompass 
the established economic policies of the Iraqi government 
as reflected in the TAL, the EPCA agreement signed with the 
IMF, and the Financial Management Law.  The NDS will be 
endorsed by the National Assembly, which represents the 
voice of the Iraqi people. 
 
Dr. Barham Ahmed Salih 
Minister of Planning and Development Cooperation 
Chairman of the Iraqi Strategic Review Board (ISRB) 
 
Iraq's Strategic Vision for National Development 
 
END TEXT 
 
3. Text of Planning Minister Barham Saleh's Speech: 
 
BEGIN TEXT 
 
Speech by: 
Dr. Barham Ahmed Salih 
Minister of Planning & Development Cooperation 
Presented to the 
INTERNATIONAL CONFERENCE ON IRAQ 
Brussels 
21-22 June 2005 
International Conference on Iraq, Brussels, Belgium -22 
June 2005 
 
Your Excellencies, 
Distinguished participants, 
Ladies and Gentlemen, 
 
Let me start by thanking the United States and the European 
Union for co-hosting this International Conference on the 
future of Iraq here in the beautiful city of Brussels.  I 
would also like to thank all of you for participating in 
this important conference.  It shows the commitment of the 
international community to the future of the new Iraq. 
This conference is an excellent opportunity for the first 
democratically elected government of Iraq to share with the 
international community its Vision and aspirations for the 
future. 
 
I would like to begin by discussing the role of development 
cooperation and planning as I see it in the reconstruction 
and development of Iraq. 
 
By just looking at the title of my Ministry many of you 
will know that the Ministry of Planning and Development 
Cooperation is responsible for donor co-ordination within 
the Iraqi government.  That is correct. But not many of you 
will know that we are also responsible for setting Iraq's 
public investment priorities in consultation with line 
Ministries, disbursing the resources and monitoring 
investment performance. 
 
In addition, we are also responsible for promoting private 
investment. 
 
I also need to emphasize that we are NOT involved in 
central planning---far from it.  We believe in empowering 
local and regional authorities to participate in their OWN 
development by identifying their own priorities and 
choosing their own strategies.  We believe that 
decentralization is the key to development effectiveness. 
It brings decision-making to the grass-roots level ensuring 
transparency, greater accountability and eradicates 
corruption. 
 
But what is the significance of having both investment and 
development co-operation under one roof? 
 
We think it is important because it reflects our view that 
private and public investment are strategic complements 
that hold the key to a brighter future for Iraq.  We 
believe that investment is the key driver of economic 
growth and rising prosperity.  Working together, public and 
private investment create powerful synergies that are the 
spark for economic growth, igniting job creation and 
raising living standards. 
 
Prudent public investment in water, health, electricity, 
roads, schools and security provides a conducive ground in 
which private investment can flourish. 
 
This formula has worked all over the world-from the United 
Arab Emirates in the Middle East to Malaysia and South 
Korea in the Far East to Mauritius in Africa and right here 
in Europe which was rebuilt after World War II with massive 
investments from the Marshall Plan. 
 
We are convinced that the same formula will work in Iraq. 
But what does Iraq need to do to attract both foreign and 
domestic investment and prudently manage public 
investments? 
 
We need an enabling environment.  An enabling environment 
for investment is about partnership between governments and 
the private sector, sharing risks between them to be 
managed by those best placed to do so. 
 
Such a partnership demands good governance, sound policies 
and capable institutions.  We have already achieved much in 
this area DESPITE the difficult transition marked by the 
crippling legacy of tyranny and the challenges of 
confronting terrorism. 
 
- We have the lowest customs fees and the most open 
trading regime in the region. 
- We have the most business friendly laws on 
corporations, banking, securities, and foreign investment 
in the region. 
- We have a new stable currency backed by an independent 
central bank. 
- We have established a Commission on Public Integrity, 
along with Inspector Generals in each Ministry as part of a 
comprehensive approach to combat corruption. 
- We have started talks on joining the WTO, and signed an 
agreement with the International Monetary Fund. 
- We are also a democracy-albeit a fledgling one. 
These actions provide important signals to the global and 
local business community.  It signals that we are doing 
everything possible to lower business risks and keep it 
low. 
In this context, I am pleased to announce that the World 
Economic Forum will soon host a meeting in Geneva to rally 
the international business community in support of Iraq. 
But that is not all.  An enabling environment requires 
public investments in infrastructure and public investments 
in our people.  Even here we have been making some progress 
despite the utter devastation we inherited from the 
previous regime. 
 
- Telecommunications have been expanded with mobile 
telephone networks, fixed lines and satellite televisions 
penetrating even the most remote parts of the country. 
- Our physical infrastructure is being rehabilitated. 
- Over 1,000 schools have been rebuilt. 
 
This is all commendable but of course much more needs to be 
done.  We are just at the beginning of the journey to 
prosperity.  We need to restore and expand basic services- 
water and electricity-to all 26 million Iraqis.  We need to 
expand and modernize health care services and bring our 
air, road and rail networks into the twenty-first century. 
We need to close the digital divide and invest in science 
and technology to harness the ingenuity of our people. 
To do this we are allocating a huge portion of our 
resources to public investment.  Our investment budget for 
2005-2007 is $28.6 billion,55 percent of which is to be 
financed from domestic revenues and 45 percent from grants 
and preferential long-term loans from donors.  This amounts 
to 27 percent of our total expenditures.  This high level 
of investment in the national budget constitutes roughly 33 
percent of Gross Domestic Product and we estimate that it 
will produce an economic growth rate of 12 percent over the 
next three years.  This is the same level of investment 
that saw the Asian Tigers grow into prosperous countries 
within a generation. 
 
But even that will not be enough to create an enabling 
environment for investment.  The government also needs to 
work differently 
- We will need to reduce public sector deficits, 
making sure that they do not crowd out private investments. 
- It demands, therefore, prudent fiscal policy and 
responsible fiscal management that are sustained credibly 
over time.  This is what my colleague the Minister of 
Finance has just spoken to you about. 
- Government credibility will require many tough 
choices such as how to reduce the burden on public finances 
of loss-making state owned enterprises, how to reform 
subsidies, how to deal with the enormous distortions of the 
Public Food Distribution System. 
- We have already begun to make these tough decisions. 
We will shortly announce a two-phase increase in fuel 
prices to gradually eliminate the subsidy element.  We are 
also committed to conducting pilot trials for monetization 
of the Public food distribution system so that we can learn 
what works and what doesn't. 
- The Minister of Finance and I are working closely 
together to introduce an Alaska type oil-dividend for Iraq. 
This will enable all Iraqis to share in the abundant 
natural resource wealth as provided for in our Transitional 
Administrative Law. 
- We are laying the groundwork for the privatization 
of state owned-enterprises and are fully committed to 
implementing all the macroeconomic and structural 
conditions in the EPCA Agreement including conducting a 
monetary survey and maintaining a single Treasury account. 
However, notwithstanding our best efforts, progress will be 
slow without productive and enhanced partnerships with the 
donor community. 
An enhanced partnership means finding ways to work better 
together.  It cannot be business as usual.  Like in every 
democracy, in Iraq today there is a sense of urgency to 
show tangible results.  Unless we can show the tangible 
benefits of a pluralistic, federal democratic, market 
economy, enemies of change will erode our attempts at 
reform.  The enhanced partnership will require BOTH better 
co-ordination among the donors and better coordination 
between the Iraqi government and the donors.  Otherwise, 
donor funds will be locked in a bureaucratic maze and never 
reach the people for whom it is intended.  This is already 
happening.  I was amazed to learn recently that of 90 
million dollars in the World Bank Trust Fund for Iraq for 
emergency water supply ZERO has been disbursed.  Of 55 
million dollars for private sector development ZERO has 
been disbursed.  Of 7 million dollars for capacity building 
only 300,000 had been spent. 
 
This is unacceptable. 
 
We need to do better.  The Iraqi side has to bear its share 
of the blame for this state of affairs. 
 
We have started taking steps to reverse this situation. 
We are strengthening our capacity as the Government's lead 
agency for private sector development and investment 
planning and investment promotion in several ways. 
 
- Through our Grant Aid Coordination Unit, the Ministry 
will strengthen its role as the point of contact for all 
donor coordination, to ensure the proper and effective 
allocation of all donor resources to the areas of highest 
priority. 
- We are strengthening our capacity to coordinate 
directly with the Ministry of Finance to integrate donor 
funding into the national budget, to ensure conformity with 
the overall budgetary framework. 
- We will improve our capacity to guide, assist and 
supervise sector Ministries in their national execution of 
donor-funded projects within their respective sectors, and 
coordinate between these Ministries and multilateral and 
bilateral financial and developmental organizations. 
- As Chair of the Council for International Coordination 
(CIC), I intend to recommend a new donor coordination 
mechanism that will be more inclusive, Iraqi-led, based in 
Baghdad. 
- We will operationalize a comprehensive Donor Assistance 
Database. 
- On the Donor side we need to work together with you to 
simplify and harmonize your policies, procedures and 
practices to minimize bureaucracy and delays in project 
implementation.  I met with many of your representatives on 
Saturday in Baghdad and look forward to working with them 
to improve our systems. 
 
At the Donor Coordination Conference in Amman next month we 
will present concrete proposals for new donor coordination 
mechanisms to quickly eliminate unnecessary bureaucracy and 
remove any bottlenecks to speedy project implementation. 
 
Ladies and Gentlemen, 
 
The Vision we have laid out for the new Iraq is bold and 
ambitious but with the support of the international 
community it is achievable.  But make no mistake the road 
ahead will be difficult.  The strategy, policies and 
actions to achieve the Vision will create winners and 
losers.  This fact challenges people with vested interests 
in the status quo.  It also challenges those with radically 
different political and economic views about the course or 
process of change.  Development is about change changing 
mind-sets, changing ways of doing business, eventually 
transforming society. 
 
Therein lies the challenge of achieving lasting change in a 
pluralistic, democratic society.  Reconciling winners with 
losers, changing minds that have long been made-up, winning 
debates on the merits and encouraging innovative thinking 
to realize our Vision we need a sharp scaling-up of 
resources we need a new Marshall Plan for the new Iraq but 
we know that greater quantities of aid alone will NOT yield 
better results.  For aid to be effective it will need to be 
better coordinated among yourselves, properly aligned with 
national priorities, quickly disbursed and with tangible 
benefits rapidly accruing to the intended beneficiaries in 
Baghdad or Samawa or Mosul or Erbil. 
 
Let me conclude with this appeal.  Iraq is a pivotal state 
in the Middle East and has the potential to use its huge 
natural resources and the dynamism and ingenuity of its 
peoples to make the world a better place for all.  We 
should be using our god-given assets to be donors for the 
development of less fortunate countries around the world. 
Unfortunately, we find ourselves in the uncomfortable 
position of seeking aid from the international community. 
To return Iraq to its rightful place in the community of 
nations we need your help, and we need it NOW.  Please DO 
NOT DELAY. The time for action is NOW.  Your assistance is 
an INVESTMENT not only in the future of Iraq, but in the 
future of the Middle East and the entire community of 
nations. 
 
The dividend from supporting Iraq NOW will be repaid many 
times over ----- and for generations to come (PAUSE) just 
as the dividend from the MARSHALL PLAN is still paying 
dividends today (PAUSE) it propelled Europe to greater 
prosperity than ever before, it is now helping Europe 
eradicate poverty around the world and promote peace and 
scuity fo all mnknd. 
adies and Getlemen 
 
It worked in Europe it will work in Iraq. 
 
Al-salaam Alaikum 
 
I thank you 
 
END TEXT 
 
4.  TEXT OF Minister of Finance Ali Allawi's Speech 
 
BEGIN TEXT 
 
Your Excellencies, Ladies and Gentlemen . . . 
 
It is a great honor to be here and to help renew the care 
for a free, independent, democratic, and prosperous Iraq. 
 
The Iraqi state and economy was devastated by years of war 
and dictatorship.  What we inherited, after the collapse of 
the tyranny, was massive indebtedness, a dysfunctional 
state geared to war and oppression, and a hugely distorted 
and ill-operating economy. 
 
The efforts needed to stop and then begin to redress this 
state of affairs are truly Herculean.  And this cannot be 
done without the full and effective participation of the 
world community. 
 
The Iraqi Transitional Government, the first fully 
democratic, elected government in Iraq's history, is 
determined to tackle this legacy, within the terms of its 
mandate and its period in office. 
 
The state of the Iraqi economy is fragile.  We are 
massively dependent on our oil revenues.  In the 2005 
budget, oil revenues account for over 95% of governmental 
revenues, excluding grants.  Our oil exports are reliant on 
the effective operation of both our Northern and Southern 
oilfields, and while our level of exports, at 1.4 m b/day 
are lower than budgeted because of the closure of the 
Northern pipeline, the total revenues achieved are within 
budget because of higher oil prices.  The flow of grants 
and loans from the international community, which are 
essential for reconstruction, have not been within the 
expected levels. 
 
The state continues to be the main employer and the level 
of unemployment is unacceptably high.  Public and private 
investment is running at about 30 percent of GDP is 
inadequate for maintaining the required level commensurate 
with the reconstruction needs of the country. 
 
Transfers from the state budget, mainly in the form of huge 
subsidies for petroleum products, maintaining the food 
distribution system, and extremely low prices for 
utilities, are a great drain on the budget. 
 
The defunct regime has burdened generations of Iraqis with 
debt levels of incredible proportions. 
 
But the ITG is determined to tackle these issues head on, 
within our limited time frame of government.  We have, in 
the Ministry of Finance, in close partnership with the 
Central Bank of Iraq and the Ministry of Planning, set four 
basic goals for the ITG in the area of economic and 
financial reform. 
 
Firstly, to maintain the momentum established by the 
Interim Iraqi Government to conclude debt reduction talks. 
 
We have inherited over $125 billion of debt, as well as 
over $50 billion of compensation claims from the Gulf War. 
Resolution of Iraq's indebtedness is crucial for ensuring 
that economic revival commences in earnest. 
 
A major step has been taken in this regard with the 
conclusion of a historic agreement with Paris Club 
creditors in November of 2004.  We have recently signed a 
number of bilateral agreements with Paris Club countries 
that confirm the framework agreement.  Here, I would like 
to express our thanks and appreciation for the US 
Government for its decision to write off all of Iraq's 
debt. 
 
We are well advanced in preparing similar proposals for the 
categories of creditors, within the overall ceiling of 
Paris Club terms.  These would include commercial 
creditors, and other countries to which Iraq is indebted. 
 
We recognize that the full application of the terms of the 
Paris Club agreement requires that we enter an agreement 
with the IMF for a Stand-by Agreement.  The Governor of the 
Central Bank of Iraq and I have had very extensive and, I 
believe, successful talks with the IMF earlier this month. 
 
Secondly, the ITG is determined to confront the issues of 
subsidies and universal entitlements, and their deleterious 
effect on economic incentives, price structures, open 
market, corruption-free transactions, and a balanced 
budget.  But we are also aware that there could be large 
welfare implications for our people, and we shall structure 
these necessary changes in ways that would minimize the 
effect on our people, and in particular the large category 
of poor and disadvantaged people. 
 
In this regard, the Ministry of Finance, is preparing a 
supplementary budget for the balance of 2005, whereby the 
process of removing petroleum subsidies will commence. 
 
We are also implementing radical reforms in our financial 
management systems, to ensure that the quality and 
timeliness of our economic information is appropriate. 
This will also help us in improving the effectiveness of 
our decision-making, reducing the level of corruption, and 
making government accountable and transparent. 
 
In the 2006 budget, which we are in the process of 
preparing for early October, we will announce a number of 
revenue generating measures, including specific actions to 
improve tax and duty collection.  This will broaden our 
revenue base, but will not and cannot replace the fact that 
we are an oil-dependent economy for the foreseeable future. 
Large commitment must continue to be made to the oil 
sector, in order to sustain and increase our level of 
production and exports.  We are budgeting for 2006 an 
improvement in our present level of exports to about 1.8 
million b/day with buoyant oil prices. 
 
But our budgeted revenues cannot possibly meet the level of 
current and future capital expenditures without significant 
support in the form of grants and loans from the 
international community.  It is here that we sincerely hope 
that the commitments made in the Madrid Conference be re- 
affirmed, activated, and extended. 
 
The ITG will also, as a matter of urgency, tackle the vital 
issue of banking sector reform.  Our banks, especially 
state-owned institutions which dominate the banking sector, 
must be modernized and made to operate as essential units 
for mobilizing savings, maintaining an effective payments 
system, and ensure the flow of credit to businesses and 
entrepreneurs. 
 
The prospects for Iraq, in the medium-term, are extremely 
bright.  Iraq's dilemma is one of the near-term.  We have 
to reconstruct our political life, our economy, and our 
civil society.  This is truly underway.  Once these 
foundations are established, then Iraq's reintegration into 
the global economy will be swift and we will regain our 
rightful place in the community of open, democratic, and 
prosperous nations. 
 
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Satterfield